NEW YORK, United States — Oil prices dropped yesterday after climbing above a 26-month high, as investors wondered if the price of crude has climbed too high, too fast.

Benchmark oil for February lost US$2.17 — more than two per cent — to settle at US$89.38 a barrel on the New York Mercantile Exchange after hitting US$92.07 a barrel earlier in the day. It last settled above US$92 on October 3, 2008, when it reached US$93.88.

After weeks of mostly positive global economic news, the price of oil has risen over the past month from about US$88 a barrel. “Everybody has been so bullish on 2011 … the mentality has just been buy it, buy it, buy it,” said Tom Bentz, analyst at BNP Paribas Commodity Futures. “The question everyone has is how much further do we have to go before we start stunting the economic recovery.”

Tradition Energy analyst Gene McGillian said he believes momentum will continue to carry oil prices toward a range of US$95 to US$100 a barrel. “What you’re starting to see is that we might have gotten a bit over-extended, so more vulnerable to profit taking,” he said.

McGillian believes traders will closely watch stock markets for cues about consumer sentiment. Wall Street was mixed yesterday after stocks rallied Monday to open the trading year. The Dow Jones Industrial Average was up about 15 points in afternoon trading. The NASDAQ and the S&P 500 were a little lower.

A stronger dollar pushed down oil and other energy prices. Commodities like oil, which are priced in dollars, become more expensive and less appealing to buyers using other currencies when the dollar rises.

In other Nymex trading in January contracts, heating oil fell 4.63 cents to settle at US$2.5065 a gallon and gasoline lost 1.33 cents to settle at US$2.4140 per gallon. February natural gas lost 1.9 cents to settle at US$4.650 per 1,000 cubic feet.

In London, Brent crude dropped US$1.31 to settle at US$93.53 a barrel on the ICE Futures exchange.